Supervisor: Evangelos Bourelos Master Degree Project No. 2016:148 Graduate School
Master Degree Project in Knowledge-based Entrepreneurship
The case of Saab Automobile AB
From core capabilities into core rigidities - A trajectory towards demise
Giacomo Buzzoni and Magnus Eklund
The Case of Saab Automobile AB
From Core Capabilities into Core Rigidities - A Trajectory Towards Demise
© Giacomo Buzzoni & Magnus Eklund
School of Business, Economics and Law, University of Gothenburg, Vasagatan 1, P.O. Box 600 SE 40530 Gothenburg, Sweden
All rights reserved
No part of this master thesis may be reproduced without prior written permission from the authors
Acknowledgements
First of all, we would like to thank our supervisor Evangelos Bourelos for his patience and effort in providing us with meaningful advice throughout these months of intense research.
We would also like to express our appreciation and gratitude towards all our respondents who have allocated their valuable time to help us interpret this interesting case. Your passion, knowledge and commitment guided us through this journey, and we have enjoyed every single day of it.
Finally, we would like to thank our peer students and all the people close to us for your support during our years of university studies.
Without you, this would not have been possible.
ABSTRACT
This master thesis is addressing the case of Saab Automobile AB, creating a full historical reconstruction using primarily extensive quotes derived from semi-structured interviews with former Saab employees and other relevant actors. The aim is to depict and discuss the roots behind the company’s historically unique capabilities and its trajectory towards failure, together with the influence of General Motors’ ownership in this detrimental process. The empirics suggest that Saab’s sustained competitive advantages were mainly based on core capabilities derived from historically determined knowledge accumulations. However, the huge success of the company based on engineering core capabilities paradoxically evolved into core rigidities which enhanced a technocratic culture, decreasing the strategic and organizational fit with General Motors. This cultural clash was nevertheless not the only reason for Saab’s demise;
low production volumes and General Motors’ mismanagement created a situation where the development of dynamic capabilities were inhibited. Due to the lack of reconfiguration of knowledge assets, the core capabilities of the firm faded over time, leading the company into becoming a shadow of its past, unable to cope with future challenges. This path towards demise ended in December 2011 when Saab Automobile AB, an icon of the automotive industry, went into bankruptcy.
Keywords: Automotive, M&A, Cultural clash, Sustained competitive advantages, Core capabilities, Core rigidities, Dynamic capabilities, Reconfiguration
Notes for the Reader
In the following thesis, when the authors are using the company name “Saab”, they are referring to the car manufacturer “Saab Automobile AB”. This notice is to clarify that the authors are not referring to Saab AB, the military and defense company when writing “Saab”.
“General Motors” is named as “GM” when referring to the main company based in the US, and “GM Europe” when referring to the Europe based subsidiary, which includes the car manufacturer “Opel”.
When mentioning “Spyker”, the authors are recalling Spyker and related companies’
ownership of Saab Automobile AB.
TABLE OF CONTENTS
1. INTRODUCTION --- 1
1.1BACKGROUND --- 1
1.2PURPOSE --- 2
1.3RESEARCH QUESTIONS --- 3
1.4THESIS DESIGN --- 3
2. LITERATURE REVIEW --- 5
2.1THEORETICAL INTRODUCTION --- 5
2.2COMPETITIVE ADVANTAGES THROUGH CORE CAPABILITIES --- 6
2.3CORE CAPABILITIES AND CORE RIGIDITIES --- 7
2.4COMPANY CULTURE AND M&A --- 13
2.5SUMMARY OF THE LITERATURE --- 16
3. METHODOLOGY --- 18
3.1RESEARCH STRATEGY --- 18
3.1.1 Iterations --- 18
3.2RESEARCH DESIGN --- 19
3.3RESEARCH METHOD --- 20
3.3.1 Primary sources – Selection of respondents --- 20
3.3.2 Secondary sources --- 23
3.4DATA ANALYSIS --- 24
3.5RESEARCH QUALITY --- 25
3.5.1 Credibility --- 26
3.5.2 Transferability --- 26
3.5.3 Dependability --- 27
3.5.4 Confirmability --- 27
3.5.5 Authenticity --- 27
4. HISTORICAL RECONSTRUCTION --- 28
4.1THE HERITAGE OF SAAB --- 28
4.1.1 When Saab’s aircrafts started to conquer the ground --- 28
4.1.2 The introduction of the V4 - A new starting point --- 31
4.1.3 Merger with Scania - A joint R&D effort --- 32
4.1.4 The turbo generation --- 34
4.1.5 The new executive car – “Tipo Quattro” --- 38
4.2GENERAL MOTORS -ANEW PARTNER FOR THE FUTURE --- 40
4.2.1 GM’s initial acquisition --- 41
4.2.2 Part sharing with Opel – The first attempt --- 43
4.2.3 Saab - A brand to preserve --- 46
4.2.4 General Motors’ full acquisition --- 47
4.2.5 Cost savings - The “Bean Counter” era --- 49
4.3SAAB ON SALE --- 52
4.3.1 Crisis at General Motors - Koenigsegg Group as a new potential owner --- 52
4.4THE SPYKER ERA -ANEW STARTING LANE --- 55
4.4.1 Spyker acquires Saab --- 55
4.4.2 An intrapreneurial atmosphere --- 56
4.4.3 The last chance --- 59
4.4.4 The bankruptcy - Saab’s demise --- 59
4.5NEVS -AN ATTEMPT OF ELECTRIFYING A DEAD COMPANY --- 60
4.5.1 Nevs acquires Saab’s assets --- 60
4.5.2 How much “Saabness” is left? --- 61
4.6REASONS FOR THE BANKRUPTCY -WHY DID SAAB DIE? --- 62
4.7WHAT WAS LEFT? --- 63
4.8QUANTITATIVE OVERVIEW (1997-2010) --- 64
5. DISCUSSION --- 69
5.1.1 What were the origins of Saab’s unique competitive advantages? --- 71
5.1.2 Did GM’s ownership influence the sustainability and uniqueness of the firm? --- 73
5.1.3 What happened to the competitive advantages of Saab until the demise of the company? --- 75
5.2DELIMITATIONS AND LIMITATIONS --- 78
5.3FUTURE RESEARCH --- 79
5.3.1 Further research on Saab --- 79
5.3.2 Further theoretical research --- 80
6. APPENDICES --- 81
7. REFERENCES --- 109
1. INTRODUCTION
In this thesis, the single case of Saab will be presented and analyzed through a historical reconstruction, following a theoretical strand considering historically determined and path dependent knowledge assets as the most relevant elements for creating long-term sustainability and survival. The authors agreed on this standpoint, arguing that the strong heritage of Saab was based upon a worldwide recognized “Saab spirit”, built upon excellent engineering capabilities and an entrepreneurial approach.
Therefore, the researchers created a full historical reconstruction relying upon qualitative material derived from full quotations from semi-structured interviews. These primary sources were supported by several secondary ones in order to increase the credibility of the research.
Nine different, both internal and external, actors have been interviewed in order to collect perceptions and opinions regarding the company in all the different eras of its life. The historical reconstruction has helped the authors in the understanding of this highly complex, and sometimes, contradictory case. Therefore, it also represents the biggest contribution of the research since it could create awareness and understanding regarding the case of Saab, providing relevant insights for future research studies.
Due to the qualitative nature of the variables, being deeply rooted in the organization since the foundation, an iterative approach following a grounded theory logic has been necessary to grasp the key elements of analysis for the understanding of this peculiar case. The findings derived from the historical reconstruction have been discussed, not being considered as normative conclusions but rather a starting point for further research regarding this milestone in the automotive industry.
1.1 BACKGROUND
SAAB, ”Svenska Aeroplan Aktiebolaget” (AB), later ”Svenska Aeroplan AB” and ”Saab Automobile AB”, has always been a carmaker challenging the design and technical solutions of mainstream producers. The “Saab approach” was to dare to be different, not being afraid of offering technology-pushed innovations, such as the first reliable application of the turbo in the passenger car field. The company always looked forward, setting high standards for design, safety and reliability.
“To me, the Saab ethos and ingredients are special and unique – design and style, engineering integrity, sporty and fun characteristics, and the unique Swedish character and elements of historical/societal narrative and personality construct.”
(Cole, 2016)
Saab’s brand is embodying the tension for the progress where the over-engineering logic was accompanied with simplicity and extreme usability. However, there was something about Saab which is not easy to grasp; a hidden innovative glimpse which was exiting the conventional scheme of the industry of that time; it was special. Due to their mindset, Saab cars were always referring to a peculiar category of niched and unconventional customers; a segment which appreciated the exclusivity and functionality of the car, without focusing on irrelevant, ornamental features. In fact, the purposeful aircraft simplicity derived from the heritage of the company created brand associations which played an important role in developing the
“trendiness” of Saab.
The success of the company was, however, not eternal. Like a comet, Saab was a bright star only for a limited but glorious amount of time, constantly engrossed in financial struggle. Thus, on the 19th of December 2011, the firm filed for bankruptcy (SvD.se, 2011) at the District Court of Vänersborg after many months of failed attempts to secure external financing. At that time, Saab was owned and operated by Spyker, which two years earlier had acquired the company from General Motors, who in turn had owned the company for almost two decades. The failure of Saab raises questions such as how a company which was so special could fail without possibilities of revival, and what the roots of the events driving the company into bankruptcy were.
1.2 PURPOSE
The case of Saab is of high academic and managerial interest due to its linkages with the topics of mergers and acquisitions, cultural clashes and core rigidities. In fact, the common opinion is that GM, as Saab’s owner, was responsible for the ultimate failure of the company, through a period characterized by cultural clashes and mismanagement of the brand. However, the explanations for the bankruptcy of Saab can be dependent on several historically determined and interconnected tangible and intangible variables, as well as environmental influences.
Therefore, the researchers’ purpose is to investigate the roots of Saab’s trajectory from success into failure, rather than the failure itself, understanding how Saab, with its heritage of innovativeness and uniqueness eventually ended up in bankruptcy. Employing this explorative framework, another aim is to foster further academic research on relevant topics derived from this study.
1.3 RESEARCH QUESTIONS
According to the purpose of this study, and by following an explorative, iterative process, three research questions have been developed with the aim of understanding Saab’s historically determined competitive advantages, how the relationship with GM influenced Saab’s competitiveness, and finally, what drove the company into its demise.
1) What were the origins of Saab’s unique competitive advantages?
2) Did GM’s ownership influence the sustainability and uniqueness of the firm?
3) What happened to the competitive advantages of Saab until the demise of the company?
The first research question is broad and explorative, based on a historical reconstruction of the life of Saab in to order to depict the key competitive advantages which brought Saab to its success. The other questions are aiming to explore if the historical competitive advantages were influenced by both internal and external factors over time.
Even though the failure of Saab has been investigated through different perspectives (Oliver and Holweg, 2011; Olson, 2008; Štrach and Everett, 2006), the authors tried to include a more qualitative oriented approach relying upon subjective variables and opinions from actors involved in the life of the company. Therefore, the research questions are relevant for depicting the trajectory and the roots of Saab’s failure.
1.4 THESIS DESIGN
As previously introduced, this thesis will be based on the following structure: In chapter 2, a literature review will be presented in order to support the subsequent discussion of the findings.
The methodology will be explained in chapter 3, including the logic behind the iterative
structure and the reasons regarding respondent selection. The main part of the thesis, the historical reconstruction of Saab, will be presented in chapter 4, representing a way for the authors to introduce a comprehensive review of the empirics and the analysis of the case.
Finally, the discussion will be carried out in chapter 5, and appendices and references will be
presented in chapter 6 and 7 respectively.
2. LITERATURE REVIEW
In the following chapter, a review of literature relevant for gathering an understanding of how Saab’s competitive advantages evolved over time and how this evolution could lead to disadvantages and, ultimately, failure, will be given. First, the prerequisites for, and building of competitive advantages will be presented, followed by an overview over how a trajectory from a competitive stage into rigidity can unfold. Finally, a review of literature explaining the importance of softer qualitative variables in mergers and acquisitions (M&A) is delivered to the reader. In the following sections, the reference “(ibid)” will be used for identifying when the same source is used subsequently (Harvard University Press Guidelines, 2016).
2.1 THEORETICAL INTRODUCTION
The strategic management literature is widely discussing how firms should be able to build competitive advantages in order to foster growth as well as increasing the probability of organizational survival. According to Penrose (1960), organizations are a collection of historically determined resources which are heterogeneous in nature. One historical antecedent of growth thus becomes an accumulation of firm-specific and unique knowledge (Penrose, 1959). This historical path dependency which is shaping organizations is a view undertaken by several authors. In Normann (2001), Henry Mintzberg states that a physical product is the output of an accumulation of all past knowledge and activities in a firm. Richard Normann’s (2001) view is very similar, considering organizations as “the platforms that liberate us from the past and enable us to move into the future” (pp. 1). Today, firms are competing on the creation and utilization of knowledge rather than financial management (Leonard-Barton 1995). Therefore, the management of these core strategic capabilities is what determines the competitiveness and survival of a firm, hence the importance of understanding how a set of core capabilities based on human resources can provide competitive advantages (ibid).
Following this literature strand, the authors will, in agreement with the methodology (Chapter 3), investigate the nature of the competitive advantages of Saab, keeping a humanistic,
knowledge-based view rather than a financial one.
2.2 COMPETITIVE ADVANTAGES THROUGH CORE CAPABILITIES
Jay Barney (1991), described in the resource-based view (RBV) model the organizational knowledge as an asset which could provide the company with a competitive advantage. In order for a firm to achieve not only a competitive advantage, but also a sustained competitive advantage, resources must be valuable, rare, imperfectly imitable and non-substitutable. The human and intangible factors are, through their underlying nature of being both causally ambiguous and socially complex, furthermore providing a resource, or a bundle of resources linked together, with the potential for a firm to achieve sustained competitive advantages (ibid).
The RBV is part of a theoretical strand focusing on internal characteristics of a company, while avoiding deeper analyzes regarding the external environment and its sources of influence. In contrary, Porter (1980) emphasizes positioning the firm on the market as the main determiner of company performance, thus representing a strand of literature more focused on external drivers of influence.
Following the evolution of the RBV, management of knowledge assets which are underlying capabilities, is considered as the only way of gaining a long-term competitive advantage (Marr et al., 2014). However, a clarification of the difference between what constitutes a capability and how it differs from a competence is needed, especially when considering them as “core”, thus being the underlying factor for success and survival.
As could be seen in the article “The core competence of the corporation”, Hamel and Pralahad (1990) introduce the “core competence” as a new strategic management paradigm. The authors are defining core competences as a combination of skills and technologies individually coming together into different product lines. Stalk et. al (1991) suggest that competences and capabilities are representing two different dimensions even though they are complementary because of their inherited human capital aspects. Due to this confusion, the two are often used interchangeably (Long and Vickers-Koch, 1995).
Marr et al. (2004) treat Barney’s (1991) capabilities and Prahalad and Hamel’s (1990) competences as sources of the previously stated knowledge-based competitive advantage, prolonging the argumentation of human capital in general, and the knowledge connected to people in particular, as being the most important factor for the creation of organizational capabilities. A certain combination of capabilities is becoming competencies (Marr et al.,
2004), thus the formerly stated capabilities are narrower and more focused while competences are broader.
The development of particular capabilities is thus relying on the possession of specific knowledge (ibid). Therefore, organizations need to know how to evolve and sustain capabilities as the foundation for sustained competitive advantages. The knowledge assets are then the base for organizational capabilities (ibid), and following the same logic, evaluation models based on intellectual capital have contributed to a better understanding of knowledge assets crucial to a firm’s development of future strategies (Marr and Moustaghfier, 2005). Many authors have attempted to provide a definition template for intellectual capital which could be used for assessing intangible assets in general and knowledge assets in specific. Marr and Moustaghfier (2005) state that; “Intellectual capital embraces any valuable intangible resource gained through experience and learning that can be used in the production of further wealth” (pp.
1116), including employees’ skills and know-how; organizational culture; stakeholder relationships; image and reputation; technological infrastructure; practices and routines, and;
intellectual property rights (ibid). Another definition which could bring clarity and understanding is emphasizing that when conducting a monetary evaluation, the intellectual capital is the sum of hidden assets which are not visible on the balance sheet (Roos and Roos 1997), being identifiable and controllable non-financial assets which do not have a physical substance (International Accounting Standards Board, 2004). In order to create value through the organizational intellectual capital, firms must evolve management practices by increasing a participative logic within an environment based on involvement and trust (Masoulas, 1998).
Therefore, managing the intellectual capital should be a dynamic, iterative process (ibid).
2.3 CORE CAPABILITIES AND CORE RIGIDITIES
“Capabilities are considered core if they differentiate the company strategically” (Leonard- Barton, 1992, pp. 111), and the basis of their existence can be traced back to knowledge within the firm (Barney, 1991; Marr et al., 2004; Leonard-Barton, 1992 etc.). These knowledge-based capabilities are path dependent, thus being considered as the accumulation of historical decisions and events. Due to this construction of capabilities over time, they become institutionalized in the company (Leonard-Barton, 1992).
According to Leonard-Barton (1992), there are four different dimensions of the set of knowledge present in a company underlying its capabilities, and all dimensions are in nature related and interconnected. The four dimensions are; skills and knowledge; managerial systems;
technical systems, and; values and norms (ibid). The skills and knowledge of employees is taken advantage of through its presence in technical systems which in turn are guided by the managerial ones. The holistic company-specific values and norms affect this link through its often implicit application of work processes and control mechanisms (ibid).
The repetition of behavior and accumulation of organizational beliefs derived from previous corporate success thus becomes a basis for core capabilities which in turn are strictly related to the knowledge system in place within the organization (ibid). Therefore, the company-specific heritage evolves into capabilities which form the uniqueness and inimitability needed for developing sustained competitive advantages (Leonard-Barton, 1992; Barney, 1991).
A strict correlation between core capabilities and long-term performance is thus evident.
However, just as core capabilities are crucial for enhancing development, they can also have an opposite, inhibiting, role (Miller, 1992). In order to maintain a certain level of organizational flexibility needed for reacting to external change, an ongoing evolution or replacement of the core capabilities is needed in today’s dynamic business environment. If not engaging in these activities, the core capabilities could become innovative obstacles, or core rigidities (Leonard- Barton, 1992). To avoid this transformation, a company should complement its excellent skills underlying core capabilities with other, more complementary ones raising a healthy voice of criticism in development phases (ibid).
Core capabilities can easily turn into core rigidities due to the nature of its antecedents of being based on past success, emphasizing the importance of a specific department due to past accomplishments connected to the performance of the department in question is common among firms (ibid). This reasoning makes the company less attractive for potential new recruits with a different skill set, which reinforces the dependency on the department bearing the core capabilities even further (ibid). A firm with an over-emphasis on engineering due to past success will e.g. not accept the contribution of a minority of market driven employees, but instead become even more engineering oriented, fostering the historically consolidated core capabilities. Due to this evolution, the engineering department tend to be more prestigious and self-reinforcing its organizational relevance in a dangerous manner (ibid).
Leonard-Barton (1992) is providing an example where Hewlett Packard engineers developing a personal computer, relied on and based their decisions on “next-bench” design, i.e. developing in accordance with needs and skills of their colleagues instead of undertaking a market driven approach. This proves as an example of a core capability transforming into a core rigidity - not being able to include a perspective other than the one from the engineering department (ibid).
Miller (1992) is another author describing the evolution of core capabilities turning into core rigidities, with the mythological tale of Icarus, the man who dared to fly so close to the sun that his “artificial wax wings” melted, causing his death. This tale describes the path from corporate success into decline, and represents a paradox where the strongest asset, being the foundation for success of a company in the past, in Icarus’ case his wings, can lead the company to failure in the long run (ibid).
As stated also by Leonard-Barton (1992), one of the reasons for this paradox, is that success is leading companies to excessive specialization and extreme confidence. Moreover, the drivers of success are causing on the one hand positive effects such as “galvanizing the corporate culture”, while on the other hand, leading the company into decline and ultimately failure (Miller, 1992). When companies are focusing on a single core capability “other aspects are forgotten almost entirely” (Miller, 1992, pp. 24). This increased focus therefore leads to a
“monolithic culture” (ibid) where the company loses its flexibility as people within the organization is trapped in a myopic approach, where only the dominant learning style is permitted.
According to Miller (1992), “Configuration” and “momentum” are two processes connected to each other, and together they are enhancing the trajectory of core capabilities evolving into core rigidities. Configuration processes are focusing structures, policies and routines on a single core corporate theme such as a particular mission, thus creating a visionary corporate objective to reach. A momentum is then suppressing all variants of the configurations, but for a few, focusing more extensively around a limited number of goals in a way which makes the process escalate. “The powerful get more powerful” (Miller, 1992, pp. 27) and others get neglected until the situation is exaggerated to its extreme. A monolithic culture is adopted, making leadership biases evolve into overconfidence due to being inherited from what worked in the past. This behavior is increasing the company’s rigidity, making the corporate culture intolerant, avoiding new challenges derived from other departments (ibid).
Miller (1992) is presenting four trajectories based on empirical findings. “Decoupling” is the first one, where firms with a high level of marketing skills are evolving from “salesmen” into
“drifters”, thinking they are able to sell anything, hence disregarding quality issues. The
“venturing” trajectory takes place when a company is successful in enhancing its economy of scale and/or scope by building new ventures, moving into careless expansion. “Pioneers” are turning into “escapists” following the “inventing” trajectory, meaning that successful past R&D leads to corporate R&D heroes who are escaping reality, inventing impractical and futuristic products (ibid).
The final trajectory is derived from companies characterized by engineering excellence and is by the author perceived as “craftsmen” through a “focusing” trajectory becoming “tinkerers”.
The competitive advantage derived from quality driven engineering is evolving into an obsession with details through a technocratic monoculture (ibid), leading to output characterized by engineering perfection rather than customer centricity. This situation is also known as building “a better mousetrap” (Spinelli and Adams, 2012). Instead of satisfying customers through high-quality products, the outcome is often over-engineered and over- priced, highly durable but also stale products due to long development time needed (Miller, 1992).
To avoid entering a trajectory as the ones stated above, a certain degree of self-reflection is needed to develop a firm in a favorable direction. Too strong efforts to create heterogeneous sub-cultures with the aim of avoiding detrimental trajectories are however not preferred, since too much organizational “noise” can lead to conflicts between sub-cultures or departments with a low level of efficiency as an outcome (ibid). In order to reach long-term success, self- reflection and customer centricity through involving customers in the value creation process is required (Normann, 2001).
In Normann’s (2001) book “Reframing Business - When the Map Changes the Landscape”, the author is trying to create a comprehensive, modern view regarding organizations by including external factors of influence both from the transactional and contextual environment as well as regarding stakeholder relationships as crucial. Adding an emphasis on learning through external influences to the earlier discussed RBV, Normann (2001) is recognizing the importance of being able to exploit core capabilities thanks to a holistic understanding of the conceptual past, being aware of the future potential trajectories undertaking a “higher systemic logic”
(Normann, 2001, pp. 200). This “Crane” approach is elevating the view of a firm, giving the
possibility to “re-frame” the company’s borders with the goal of recognizing and acting on dormant assets by introducing customer co-production and co-creation of value with a value star that is customer-centric, rather than a value chain (Porter, 1985). These abilities are emerging from this process as a new consciousness regarding how the past is affecting the present and the future due to an enhanced learning style (Normann, 2001).
Following the same path that started with the RBV (Barney, 1991) and their consequent evolution where “core capabilities” and knowledge are considered as the main competitive assets (Marr et al., 2004), Ambrosini and Bowman (2009) introduce the concept of dynamic capabilities as an approach for companies to address rapid environmental changes. Just as Normann (2001) stresses, the authors are claiming that firms, in order to create a sustainable competitive advantage, should renew, reorganize and create new resources. The definition for
“dynamic capabilities” has been introduced and developed by Teece and Pisano (1994). The
“dynamic” part of the concept is connected to the possibility of facing the environment-based shifts and the ability of having a strategic answer within a short time horizon, while
“capabilities” is based on the practices of adaptation, re-configuration and exploitation of competences within an unstable environment (ibid). This definition evolved into: “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997, pp. 516).
Additionally, Teece and Pisano (1994) state that competitive advantages of a firm are derived from dynamic capabilities which are “rooted in high performance routines operating inside the firm, embedded in the firm's processes, and conditioned by its history” (pp. 538), thus being learning-based activities that systemically shape processes and routines to reach a greater effectiveness (Zollo and Winter, 2002). Therefore, dynamic capabilities are representing a shift from an emphasis on resources into focusing mainly on processes that are increasing the flexibility of a firm in order to adapt and survive in the long run (Ambrosini and Bowman, 2009). Moreover, in order to reconfigure operating routines, a firm can exploit its learning mechanisms, being based on tacit accumulation of experience, knowledge articulation and knowledge codification (Zollo and Winter, 2002). These mechanisms could directly lead to an evolution of the operating routines, but could also indirectly affect them through the mediation of dynamic capabilities (ibid).
Even though being difficult to identify specific dynamic capabilities, Wang and Achmed (2007) are presenting three main factors; adaptive capability; absorptive capability, and; innovative
capability. Adaptive capabilities are connected to the ability to identify and exploit new, emergent opportunities, balancing short- and long-term objectives with strategic flexibility.
Absorptive capabilities (ibid) are referring to absorptive capacity which is a company’s ability to identify and use information derived from external sources such as partners (Cohen and Levinthal, 1990), therefore utilizing externally acquired knowledge, implementing it within the previously existing company knowledge (Wang and Achmed, 2007). Finally, the innovative capabilities could be understood as a capability of developing new products and/or entering new markets due to specific behaviors and processes (ibid). An example of a dynamic capability is the development of an effective post-acquisition integration of a daughter- and a mother company since it involves modifications of both organizations’ procedures (Zollo and Winter, 2002).
There are conflicting views in academia regarding the possibilities to adapt to a changing environment. On one hand, there is the view given above including Teece and Pisano’s (1994) discussion on dynamic capabilities. On the other hand, there is a strand considering organizations as incumbents which are replaced by new entrants due to environmental shifts (O'Reilly and Tushman, 2008). The latter, Schumpeterian view, could be considered supported in some industries as is shown in the study of O'Reilly and Tushman (2008), so therefore, both points of view are academically viable.
To build upon both Teece and Pisano (1994) and Normann (2001), in order to avoid core rigidities, companies should be able to continuously innovate and create different sets of knowledge fostering creative thinking, also developing capabilities currently not present in the organization (O’Reilly and Tushman, 2008).
To achieve sustainable competitive advantages, companies should therefore aim for being able to integrate exploration- and exploitation phases in their learning mechanisms (Zollo and Winter, 2002). Exploitation is a way of increasing performance such as efficiency and profitability from an asset through a convergent logic (O’Reilly and Tushman, 2008), and exploration, a cognitive phase focused on discovery, innovation and divergence (Zollo and Winter, 2002). The ability responsible for this paradoxical integration is called ambidexterity, a reconfiguration process aiming at exploiting present- and new opportunities at the same time, thus having the ability to focus both on short- and long-term objectives (ibid).
Following this logic, core capabilities are connected to organizational processes and activities which are providing a current advantage. However, these core capabilities are not dynamic
capabilities due to the fact that they are not providing enhanced flexibility to the company in facing future environmental shifts and threats. Dynamic capabilities are instead representing the ability to create an ambidextrous company, able to overcome “competency traps” (Leonard Barton, 1992) due to the coexistence of mediated short and long-term objectives (O’Reilly and Tushman, 2008), also seen in “adaptive capabilities” (Wang and Achmed, 2007). An example of the quest for enhanced flexibility of incumbents in the automotive industry can be found in Nobeoka and Cusumano (1998) who claim that the ability to rapidly apply various technologies in several platforms is crucial for long-term sustainability.
Furthermore, ambidexterity in large organizations is connected to a better higher sales growth.
In fact, ambidexterity is more effective than functional, cross functional or spinoff designs as could be seen in the study from Tushman et al. (2007). Ambidexterity is also associated with long-term success, improved innovation and an increased financial performance (O’Reilly and Tushman, 2008).
2.4 COMPANY CULTURE AND M&A
Mergers and acquisitions (M&A), as in any strong strategic collaboration, are representing a challenge for both organizations entering the process. These challenges are even enhanced, potentially generating conflicts, when the merge or acquisition is taking place across borders (Fealy and Kompare, 2003).
First of all, the term M&A, broken down into “mergers” and “acquisitions” is often mixed together. In fact, only 3% of all M&A turned out to be mergers, thus M&A almost always takes the form of acquisitions (Teerikangas and Very, 2006).
Teerikangas and Very (2006) stress the importance and the complexity of the concept of company culture. In fact, the concept of culture is including more than national and organizational culture. Also industrial culture, societal sub-cultures and multiple organizational, i.e. functional cultures are present in the definition. There are also certain interconnections between different levels of culture where changes in one part of the cultural system can trigger unexpected chain reactions. Therefore, the human dependent factors embodied in the company culture are the key variables to study in order to foster a positive outcome of M&A (Cartwright and Cooper, 1993).
Three different strands of research of culture in an M&A context could be identified. First, organizational culture is considered as a variable with the rationale taken that it affects an organization member’s commitment, satisfaction, productivity and long-term sustainability.
Second, the relationship between national culture and M&A performance shows differences between studies, with one of the reasons being that sub-cultures often exist also within national borders, and vice versa - cultures could also be very similar across national borders. Third, studies considering several cultures, such as both national and organizational, being present at once. In this matter, “acculturative stress” (Very et al., 1996) is introduced as a complex concept which, depending on its dimensions, can lead to both positive attraction and negative stress in rather unpredictable ways.
The cultural variable within M&A is considered to be one of the most important factors for the integration of two different companies in either a merger or an acquisition, and much research has been conducted trying to explain the relationship between “cultural fit” and the subsequent performance of the new constellation (Teerikangas and Very, 2006). Following the RBV strand, a company’s culture - values, beliefs, assumptions and symbols - could be the foundation for a sustained competitive advantage (Barney, 1986). Consequently, managing the culture is a crucial activity for future sustainability and differentiation from competing firms (ibid).
In an M&A context, a fundamental interrogative is how to preserve the intangible origins of the competitive advantages of the firm being acquired, knowing that in most cases, M&A destroy rather than preserve these characteristics. To achieve synergies, the intellectual capital, e.g.
embodied in employees’ knowledge, should thus have the ability to be transferred, shared and taught (Gupta and Roos, 2001).
Therefore, cultural compatibility is a key element in leveraging the intellectual capital of the acquired company and achieving a good performance (Cartwright and Cooper, 1993).
Evaluating the culture of the firm being acquired thus becomes important for the understanding of the future cultural compatibility and fit.
The longitudinal perspective is also an important factor to take into consideration, given that M&A processes are dynamic and evolutionary, i.e. changing over time. This includes variables such as integration strategy which could differ from an absorption strategy where the firm being acquired is fully absorbed, to a full preservation strategy where the acquired firm remains autonomous, hence lowering the risk of a cultural clash (Teerikangas and Very, 2006). The dynamic characteristics of M&A of course opens up for changes also in company strategy,
implying that a change from preserving into absorbing strategies could occur. The strategy chosen will thus mediate the relationship between culture and performance in M&A. Also, the behavior of the acquired firm will of course affect the integration process (ibid).
The concept of “acculturation” represents one strand in the M&A literature focused on human capital. The underlying processes imply that separation or integration of two different cultures is taking place (Seo, 2005). According to Cartwright and Cooper (1993), a holistic model for understanding the compatibility and positioning of different cultures are derived from two main variables; willingness of employees to abandon their own culture, and; perception of the attractiveness of “one other” culture, giving four different potential outcomes. The first one,
“Assimilation”, happens when the acquired company will adopt the other company’s culture, only if the employees are willing to abandon their own culture and if the perception of the other company’s culture is positive. When the acquired organization is willing to abandon their own culture, but the other organization’s culture is, however, not considered attractive, confusion and a lack of belongingness is creating a “Deculturation”. “Integration” is instead taking place when the acquired company is willing to abandon their own culture at the same time as the other culture is perceived as attractive. A new culture, evolved from the original two then emerges. However, this could lead to several collisions. Finally, when “Separation” is the outcome, several different cultures still exist after resisting several attempts of integration, increasing the probability of cultural clashes and misalignment of objectives (Cartwright and Cooper, 1993).
Moreover, according to Teerikangas and Very (2006), the acculturative stress that therefore could occur will depend upon the congruence between both firms’ preferences for modes of acculturation, taking e.g. historical development of the firms and the employees’ deeply rooted mental schemes into consideration. The dynamic characteristics of this factor should furthermore not be neglected since the employees’ perceptions could change with time during the integration process. In the case of a more absorbing M&A strategy, at least one of the companies need to change, meaning that the cultural integration becomes even more important.
In a set-up based more on autonomy, this consideration becomes less vital. Over time, the managerial integration efforts play an important role as well, including initial evaluation, strategy, attitude and integration skills. The authors pinpoint that the evaluation of the culture of the company being acquired is crucial and that an assessment as such should be done simultaneously as the more explicit and straight-forward financial one is being conducted.
Thus, as a whole, integration strategy, acculturative modes from both firms’ perspectives, the
progress of cultural integration and finally managerial efforts are mediating M&A performance, also taking into consideration its dynamic characteristics (ibid).
As previously stated, a cultural clash is inevitable when the two companies have different histories, values and practices. However, this trajectory follows four predictable steps, introduced and presented by Marks et al. (2013). The initial step is called “Perceive Differences”, and people notice differences when comparing the organization with the new company involved. As an evolution of this, the “Magnify Differences” step emphasizes these dissimilarities, and distinctions become sharper and polarized. As an exaggeration,
“Stereotypes” occur, representing generalizations of the magnified differences. Members within the organization begin to consider employees in the other company within categories;
finance people in the mother company are for example all seen as “bean counters” and all engineers in the daughter company are perceived as “whirly-birds”. In the final “Put-downs”
step of this trajectory, the cultural clash has reached its peak and the parent company is considered as inferior. The daughter company is e.g. perceiving itself as innovative, entrepreneurial and superior, while looking upon the mother company as “pants pressers”, focused on bureaucracy. The opposite view from the mother company is also taking place, identifying the acquired firm’s people as not able to run a real business properly (ibid).
2.5 SUMMARY OF THE LITERATURE
Competitive advantages are more likely to be sustainable and inimitable if they are based on path dependent and historically determined core capabilities. Due to their interdependence with the accumulation of knowledge, these competitive advantages are strongly linked with the culture of the firm. The department possessing the most important knowledge-assets will determine the sustainability of the company, enhancing its relevance and importance within the organizational structure and influencing the values embodied in the company culture.
This self-reinforcing cycle could generate a strong predominance for a monoculture and intolerance of divergent approaches or views from other departments, creating core rigidities based on the previously determined core capabilities. On the other hand, this convergence can provide the possibility to create short-term, highly successful outputs.
Due to these core rigidities, the firm can lose contact with its customers entering a path to demise in the long run. There are nevertheless solutions represented by dynamic capabilities,
being a way of mitigating short and long-term objectives by questioning the major learning style of a firm. In order to re-organize and better exploit assets, an analysis of the evolution of the core capabilities becomes highly important in the context of an M&A, knowing that the strategic and organizational fit can be based on different integration strategies, considering the obstacles which the mother and daughter company are going to face.
3. METHODOLOGY
The following chapter will explain how the research method has been developed in order to fit with the previously stated research questions and purpose, where the authors are considering knowledge-assets as the most relevant element in order to achieve sustained competitive advantages in a firm. Therefore, the most interesting and relevant variables studied in this thesis are based on qualitative materials, subsequently combined with a quantitative overview.
3.1 RESEARCH STRATEGY
In order to answer the research question, the research strategy is based on a combination of a qualitative and a quantitative method, although being primarily based on qualitative data derived from semi-structured interviews. This approach has been used considering that the purpose of the study is to enrich the knowledge regarding a specific case (Bryman and Bell, 2011). Therefore, the qualitative nature of the research is built within an explorative framework following the philosophy of a grounded theory approach (Suddaby, 2006), based both on an inductive reasoning as well as a deductive logic (Leedy and Ormrod, 2005).
One of the most important parts of a grounded theory approach is to be iterative in the way of working with literature, empirics and analysis (Howell, 2013). By undertaking this approach from the beginning, there has been an evolution of the specific focus in this thesis, starting from having Saab as an interesting single case to investigate due to an extensive media coverage and conflicting views regarding what drove the company into failure. The evolution of the topic has thus gone from gathering an understanding from actors present within the Saab context, listening to their interpretations regarding the initial success and later failure of the company.
Therefore, a full historical reconstruction is in this thesis used as a tool of analysis when answering the research questions.
3.1.1 ITERATIONS
Being an on-going process of iterations throughout the evolution of the thesis, three major iterations can be identified and are here outlined in order to create a holistic view of the presented study from a reader’s perspective. The nature of the iterations has been to “zoom”
back and forth in order to create an increased understanding of the historical events and its future implications.
The first iteration was focusing on creating a common ground regarding the history of the company through an analysis of important events, including innovations and car models released. This phase was concluded at the time of the bankruptcy. This iteration corresponds to the first research question; “What were the origins of Saab’s unique competitive advantages?”
Strong initial empirical findings, especially based on the primary data collected, suggested that one big antecedent of the fading success of Saab could be linked to a cultural clash with GM.
Therefore, this relationship became a major, relevant aspect to investigate further in order to understand the impact of GM on the previously identified historical competitive advantages.
This was supported by both primary qualitative-, as well as secondary data, and the focus of this iteration corresponds to the second research question; “Did GM’s ownership influence the sustainability and uniqueness of the firm?”.
Ultimately, the authors focused upon the third research question; “What happened to the competitive advantages of Saab until the demise of the company?” undertaking a broader perspective, regarding other potential reasons which led the company into its demise. This final iteration aimed to depict the trajectory and the roots of the original competitive advantages of the company, understanding if they were still present during different chronological periods, namely in the Spyker era, the bankruptcy, and the last ownership of National Electric Vehicle Sweden AB (Nevs).
While separated, the three iterations were highly interconnected, and the research questions evolved based upon the empirical findings derived from the semi-structured interviews.
3.2 RESEARCH DESIGN
The case of Saab will be analyzed as a single case study that could be treated as a “revelatory case” (Bryman and Bell, 2011), being only recently fully accessible due to a lengthy bankruptcy process. At this particular time, individuals involved in the company’s history are more freely able to provide relevant information needed in order to treat it as a topic of academic and practical relevance.
According to Yin (2009), there are several advantages when using a single case study. By undertaking this approach, the authors have been able to deconstruct and reveal as much as possible of the specific phenomenon, which has been advantageous given the high level of complexity in the automotive industry in general. The case of Saab includes peculiar contextual factors and unique characteristics, demanding a more idiographic approach (Bryman and Bell, 2011).
The downside of using a single case is that there is a lack of external validity in such research, hence the generalizability of the conclusions into other contexts and cases is severely limited (Yin, 2009). This lack of possibility to draw normative conclusions is however not affecting the purpose of this thesis, being as stated revelatory in nature, and hence advancing knowledge and opening up for further research which can be more focused on conducting generalizable studies where statistical inferences can be drawn, e.g. by conducting comparative and/or cross- sectoral research with a bigger emphasis on quantitative data (Bryman and Bell, 2011).
3.3 RESEARCH METHOD
In this section, a discussion regarding the method for collecting and treating primary and secondary data will be carried out.
3.3.1 PRIMARY SOURCES – SELECTION OF RESPONDENTS
Primary qualitative data has been collected through face-to-face interviews which have been recorded and fully transcribed. Due to the privilege of anonymity, one of the respondents is not mentioned by name, and neither was the interview with this respondent recorded. The empirical results derived from this interview will be referred to as “Respondent X”. Furthermore, an interview with Lance Cole, a famous Saab author, was conducted through email on his request.
All the respondents approved the usage of the material and furthermore, they agreed on the content of the transcriptions and to, in text, be referred to as “(Surname, year)” as in accordance with Harvard University Press Guidelines (2016). All the interviewees also had the possibility to clarify and elaborate further on their transcribed interviews afterwards.
In this section, a rationale for why respective respondent has been chosen as a source for empirical data collection will be given. Furthermore, a short description of the person in
question and their relationship towards Saab will be handed out in order to give the reader the opportunity to recognize the social context and culture the person was encountered in together with potential biases that might have affected the respondents’ accounts (Bryman and Bell, 2011) when reading the historical reconstruction of Saab (Chapter 4).
Olle Granlund (at Saab 1965-2000), product manager and engineer & Niels-Uno Håkansson (at Saab 1970-2007), engineer
Olle Granlund (Granlund, 2016) and Niels-Uno Håkansson (Håkansson, 2016) were chosen as the first respondents and they were interviewed together in the facilities of the Saab Museum in Trollhättan. They are both members of the association “Saab veterans”, having worked in the company for many years. They were approached since the researchers wanted to gain a deep understanding of the historical evolution of the company from the point of view of former employees, from its earlier years over several decades and also ownership constellations, thus covering the majority of the history of the company (1965-2007). The two respondents also fit with the purpose since they could contribute with different perspectives; both a managerial and an engineering one.
Lance Cole, author of “Saab Cars - The complete story” and “Saab 99 and 900 - The complete story”
Lance Cole (Cole, 2016), designer, author and writer was the only interview conducted through email. He was chosen as a respondent due to his deep knowledge regarding Saab’s history and sincere interest and passion about Saab cars. He also provided the authors with a more holistic view, including the customers’ perspective, and an ability to benchmark Saab with other automotive manufacturers. Furthermore, Cole’s two books listed in the header were part of the secondary sources used for the historical reconstruction.
Anders Wennberg, Chief Resource Officer at Chalmers University of Technology
After learning that Saab was characterized by a high degree of innovativeness, the researchers wanted to learn more about Saab’s potential interactions with universities in general and Chalmers in particular, in order to find if Saab was collaborating with other actors in the automotive field, thus interviewing Anders Wennberg (Wennberg, 2016).
Bo Anulf (at Saab 2001-2011), Chief engineer and IT manager (interview A)
Through several iterations, the focus became more pointed towards how the procedures and culture changed when Saab was owned by GM and Spyker. Bo Anulf (Anulf, 2016a) was fitting the purpose of exploring these different ownership periods due to his managerial and engineering role in the company during these years, adding consultancy tasks also in Nevs.
“Respondent X”, financial expert involved in the last period of Saab and the bankruptcy This respondent (Respondent X, 2016) asked to remain anonymous in accordance with the privilege of confidentiality. Especially knowledgeable in the bankruptcy, this person provided the authors with insights and documents valuable for depicting the nature of the assets present in the bankruptcy estate.
Jens B. Nordström, economic journalist and news reporter TV4, responsible for following Saab closely in the last years of the company life
Jens B. Nordström (Nordström, 2016) was able to provide an external perspective while at the same time having worked very closely to the company during the acquisition of Spyker up until the bankruptcy. He was able to offer a different opinion regarding what happened during the last years of Saab’s life. Additionally, he helped the authors in understanding the influence of Spyker’s ownership, and several different stakeholders and environmental factors involved in the process.
Steven Wade, (at Saab 2011-2012), Saab publisher & founder and author of the blog saabsunited.com since 2005
Steven Wade (Wade, 2016), Saab enthusiast and famous Saab blogger, was able to provide an internal perspective during the Spyker ownership. Being a blogger and highly knowledgeable about Saab, he could also demonstrate insights regarding the evolution of the company from an outside perspective, including access to many insider sources not accessible by the Swedish press. Wade is currently employed by Koenigsegg Automotive AB.
Christian von Koenigsegg, founder of Koenigsegg Automotive AB and shareholder of Koenigsegg Group AB
Christian von Koenigsegg (von Koenigsegg, 2016) was approached when the focus of the thesis had iterated several times into being on how the Saab-GM interaction affected the evolution
